September 9, 2014

Ditch the Tax Incentives and Pursue General Tax Cuts Next Year

The Missouri Legislature’s 2014 veto session begins this week, and the chambers are set to reconsider dozens of bills rejected by the governor earlier this summer. While a handful appear to have enough support for an override, most sit in legislative limbo, fates to be determined. Among those bills hanging in the balance are a package of tax incentives I’ve talked about many times before.

These incentives are bad policy in general, but to create these handouts well outside of the legislature’s normal budgeting protocol is inexcusable. The budget must balance, and this late-breaking special interest goody bag throws the state’s budget out the window. Missourians deserve better than to be treated like a cash spigot for the well-connected.

There’s also a larger picture that needs to be understood here. Some of the most vocal tax cutters are also big boosters of tax incentives, but by creating, expanding, and sustaining tax handouts like these, our state is making the enactment of future tax cuts much more difficult. We should all be paying for the cost of our government, but increasingly, well-connected special interests are being exempted from that burden. That’s wrongheaded policy. As a general rule, if taxes are going to fall for anyone, they should fall for everyone. It’s time to kick the tax incentive circus out of Jefferson City.

The legislature should come back next year and pass broad and responsible tax cuts for Missourians. The first step is rejecting this year’s incentives.

July 14, 2014

‘Right To Try’ Law Gets Gov. Nixon’s Signature

Today is the last day for Missouri Gov. Jay Nixon to veto or sign legislation that the 2014 General Assembly passed. So, with the state’s “Right to Try” proposal still sitting on his desk, I started my workday with a smidgen of trepidation. “Right to Try,” you might remember, would empower patients with terminal illnesses to more freely seek experimental medications in hopes of finding something that could help them.

The concern: Would the governor veto “Right to Try” this year, much like he vetoed the Volunteer Health Services Act last year?

The answer: Nope. He just signed it.

The Governor signed two health-related bills, which will provide Missourians in specific situations with additional options for medical treatment of illness and disease. House Bill 1685 allows drug manufacturers to make available investigational drugs, biological products, or devices to certain eligible terminally ill patients. House Bill 2238 allows the use of hemp extract to treat some individuals with epilepsy and also allows the Department of Agriculture to issue licenses to grow industrial hemp strictly for research purposes. House Bill 2238 contains an emergency clause.

I talked about this bill a lot in the last few months. This was, to me, an obvious opportunity to empower people to make each other’s lives better. The government should open doors for people to care for one another, not erect and maintain barriers to helping each other. “Right to Try’s” enactment is not only a victory of reform-minded policy, but more importantly, it is a victory for Missourians in need.

Congratulations to the Missouri House and Senate for sending the bill to the governor, to the legislators who sponsored the bill and powered this important conversation, and to the governor for making the right decision by adding his support to the unanimous votes of the legislature. Well done.

June 18, 2014

Thank Obamacare: Buchanan County, Mo., Tops List For Insurance Rate Hikes On Men

Last year, Forbes published a story about how much insurance rates were expected to rise across the country because of Obamacare. Today, Avik Roy and his crew published their follow-up. The study has bad news for just about everybody, but our own Buchanan County appears to have been hit especially hard by the President’s signature legislation. (Emphasis mine.)

Our new county-by-county analysis was led by Yegeniy Feyman, who compiled the county-based data for 27-year-olds, 40-year-olds, and 64-year-olds, segregated by gender. We were able to obtain data for 3,137 of the United States’ 3,144 counties….

Among men, the county with the greatest increase in insurance prices from 2013 to 2014 was Buchanan County, Missouri, about 45 miles north of Kansas City: 271 percent. Among women, the “winner” was Goodhue County, Minnesota, about an hour southwest of Minneapolis: 200 percent. Overall, the counties of Nevada, North Carolina, Minnesota, and Arkansas haven experienced the largest rate hikes under the law.

Amazingly, that 271 percent figure conceals something else about Buchanan that is just jaw-dropping. If you use Forbes’ national rate navigator, you discover that a 27-year-old man in Buchanan County can expect an individual insurance policy rate increase of — get this — 411 percent.

This is “affordable”? How can any politician tell his or her constituents with a straight face that Obamacare is working, or that we need to help the Feds implement this disaster in Missouri? Missouri needs market-based insurance reforms, not Obamacare and its Medicaid expansion. Our people deserve better than this raw deal.

June 5, 2014

Governor Should Veto Data Center Tax Exemption Legislation

The legislative session may be over but that doesn’t mean the lawmaking is done. Missouri Gov. Jay Nixon has a plethora of bills before him at this writing that he can either veto, sign, or let pass into law without his signature. Among them is a battery of sales tax exemption changes that deserve the additional scrutiny the governor is giving them.

When the legislative session started, talk about sales tax exemption changes generally focused on a problem the legislature actually needed to address — whether personal training services should constitute “entertainment” for sales tax purposes. Unfortunately, that evolved into a package of legislation (encompassing several bills) that also included sales tax exemptions for manufactured homes, data centers, electricity transmission, and more. The governor is predicting that the cost to the state for the bills could be upwards of $400 million, with hundreds of millions more in costs at the local level.

Whether that top-line total is exactly correct, it is clear that many of these sales tax carve-outs look a great deal like special interest income tax credits when it comes to the narrowness of the benefits and the political considerations that went into extending them. Indeed, legislators have been trying to direct tax credits to data centers in the state for years now. That the legislature decided to throw money at the industry through a different section of the tax laws comes, unfortunately, as little surprise.

The legislature is right to cut taxes for Missourians, but cutting big special deals for favored industries, whether through tax credits or exemptions, should be a non-starter. More to the point, the governor should veto the data center legislation even though doing so would mean better tax policies — which were bound to the fate of the questionable exemptions — will have to be reintroduced next session. If he does, next year, the legislature should take what the state would have foregone with the business exemptions and apply much of it instead to broad tax cuts for businesses. If the state can do without the millions in revenue assigned to many of these special exemptions, it can continue to do without that revenue — but this time through broad tax cuts. That would be a better policy.

June 4, 2014

Sweetness And Power & Light

I want to follow up briefly on the pieces recently published in The American Spectator and here on the blog about entertainment district subsidies in the Show-Me State. Michael Rathbone’s review of Saint Louis’ Ballpark Village is worth your time if you haven’t read it yet. But I want to highlight again Kansas City’s own tax incentive sinkhole, the Power & Light District. The Wall Street Journal video below is an oldie but goodie that captures how expensive the city’s entertainment district gamble has been — and how expensive it will continue to be in the years ahead.

The cost of the city’s plan has actually gotten worse since the Journal published this video in 2012. Just a few months ago, the Kansas City Council actually voted to refinance the district’s debt to help pay for pensions, extending the term of the repayment period and adding tens of millions of dollars to the district’s cost.

The refinancing calls for adding seven years to the Power & Light entertainment district’s debt payments, from 2033 to 2040. It lowers the payments from 2015 through 2019 and frees up cash to help pay for pension reform, especially in the 2014-15 budget. But it bumps up the debt payments between 2020 and 2040, a net increase in overall debt of $36 million.

Who’s going to pay for all of these costs? Kansas Citians, of course, most likely through higher taxes, lower services, or a combination of the two. Businesses that have to compete with the newly subsidized competitors will also be paying for it not only in tax dollars but in customers, too, as their clientele are diverted to new taxpayer-funded developments. If these massive projects were going to work, they should be able to make it on their own, and as the Spectator observed:

The forbidding economics of these projects should be evident from the start, since their need for subsidies shows that they have inadequate market demand. Yet they continue to open, representing the fallout that occurs when officials speculate with public money.

That chronic speculatory impulse of Missouri’s public officials must stop. If our local and state governments can afford to massively cut taxes for some, they can afford to cut taxes for all. That’s the direction in which tax policy in this state must continue to move.

May 16, 2014

Landmark ‘Right to Try’ Legislation Crosses The Finish Line

As the session was coming to a close this afternoon, the Missouri House and Senate both passed the “Right to Try” bill and sent the legislation to the governor. As I’ve written and testified in the past, the law will allow greater flexibility for terminally ill patients. Specifically, it allows these patients to seek medications that the drug companies have developed and the FDA has determined to be safe for humans, but are not yet sold on the market. Assuming the governor does not block it, Missouri is set to become one of the first states in the country to enact such legislation. Following the passage of last year’s Volunteer Health Services Act, Missouri is certainly on a roll when it comes to enacting forward-looking and people-empowering health care reforms. Right to Try’s passage is a victory for Missourians.

Congratulations to the legislators who made the bill happen, to the Goldwater Institute, which has pioneered the idea, and most importantly, to the patients and families who will benefit from this law’s enactment.

Medicaid Expansion Push Fails Again; Ditch The Spending And Enact Real Reform

This Wednesday, the Obamacare crowd introduced, and then withdrew, their final attempt at Medicaid expansion in Missouri. That means the state will not expand Obamacare for another year, and that’s good news for Missourians. It isn’t “conservative” to strap a spending bomb to substantive Medicaid reforms and then call the whole thing a “transformation.” Legislators were right to reject it.

Instead of suggesting that special interests will block substantive Medicaid reform, Missouri’s policymakers should stand up, fight the special interests rather than carry their legislation, and deliver the Medicaid fixes we have been promised for years. That some lawmakers would articulate specific reforms and yet would block their progress as a way to force an expansion is as cynical as it is disappointing.

No doubt, expansion supporters will promise that the Medicaid fight will continue next year. And they’re correct. We’ll see you then.

May 12, 2014

Thoughts on Medicaid, Right to Try, and Paycheck Protection As Legislative Session Wraps Up

Government IconExpect things to get a little wild before the legislature finishes its work at 6 p.m. Friday. Here are some of the issues I’ll be paying close attention to.

First, Medicaid expansion. To reiterate, Missouri should not expand this expensive, broken health care program. “Medicaid Transformation” is not the same thing as “Medicaid reform.” Transformation is just expansion rebranded.

Second, Right to Try. The bill would allow terminally ill patients greater flexibility to seek experimental medications, making this bill the latest in a string of proposed reforms — including last year’s Volunteer Health Services Act and this year’s hemp oil bill – emphasizing greater access in care and treatment. I testified in favor of the law in both the House and Senate, and while several states are considering the law this year, Missouri could end up being the first in the nation to pass it.

Third, paycheck protection. Paycheck protection would allow public employees in unions to, by default, keep more of their money rather than have it automatically siphoned off for a union’s political activities. It’s a common sense approach to a thorny free speech problem, which I’ve testified about before. If it goes to voters, you’ll hear much more about this topic from me in the weeks ahead, but the Senate will have to vote on it first.

There are other issues which are also lingering in the legislature, including tax credit reform and voter ID. I support both. TIF reform and the transportation tax are also big issues, and I would direct you to David Stokes’ and Joe Miller’s excellent work on those topics respectively. The school transfer issue is still very much alive, and of course there’s Tesla versus the car dealers, which you can read more about here and here.

It’s been a long session, but it’s not over yet. Stay tuned to Show-Me Daily as the week goes on for updates on these issues.

Tesla, Car Dealers and Milton Friedman: The Problem of Protectionism and Cronyism

Last week at Forbes, I wrote about an attempt by Missouri car dealers to prevent electric car manufacturer Tesla from selling its cars directly to customers. Although the amendment in question quietly passed the state Senate, I do expect that free market advocates in the House will loudly reject this attempted protectionism and cronyism.

That said, it must be noted that although Tesla is being wronged by the proposed amendment, policymakers would do well not to proclaim the heavily-subsidized company to be some spirit animal of the free market. Indeed, many businesses are quick to proclaim their love of the market while simultaneously marshaling special protections and subsidies to themselves. Tesla fits that description to a T; hit up that last link for a list of examples.

The Tesla episode reminds me of an old video featuring famed economist Milton Friedman. Asked some decades ago about who can save the free market, Friedman framed his response this way:

You talk about preserving the free market system. Who has been destroying it? The business community must take a large share of the responsibility. … You must separate out being pro-free enterprise from being pro-business.

The short video, which I commend to all of our readers, is below:

There is a difference between being pro-business and being pro-market. Clearly the proposed legislation would be pro-dealers; it would not, however, be pro-Tesla or pro-consumer.

May 9, 2014

Missouri’s Tax Reform Journey Has Only Just Begun

Taxes IconFor Missouri’s tax reformers, this was one big week. Sure, the legislature passed the state’s first individual income tax reduction in nearly a century. But Tuesday’s override vote also signaled that the sands in the Missouri capitol are finally shifting toward sound, market-oriented, and growth-promoting tax policies, and away from Jefferson City’s business-as-usual tax policies.

As an organization that has helped lead tax reform efforts in Missouri for many years, the Show-Me Institute is pleased to see the legislature take this baby step of reform. Make no mistake — this is a very modest tax cut, and smaller than we preferred. But to be clear, this tax cut serves as a mile-marker on the path of greater reforms.

Thanks to the hard work of countless supporters of the free market, that pathway of reform is now opening wide. Policymakers are finally recognizing that the words “free market” actually mean something . . . and that free markets actually matter.

When we at the Show-Me Institute say that we believe in free markets, what we’re really saying is that we believe in people. We believe in people to invest in themselves and their families and to make this state a better place to live. We believe in that bottom-up solution which puts its faith in our people, not a top-down plan that puts its faith in the government. We believe in you.

And we believe this week’s tax cut is just the first step on the road to enduring, people-empowering tax reform in this great state. We look forward to the future, and we hope you’ll join us on our journey to make our state even better.

May 6, 2014

We Have A Tax Cut: Missouri Legislature Overrides Governor’s Veto

It was a long road, but after a 23-8 override vote in the Missouri Senate yesterday and a 109-46 vote in the Missouri House today, Missouri has its first individual income tax cut in nearly a century. Senate Bill 509′s passage is a victory for taxpayers that stands in stark contrast to tax handouts, like Boeing’s, that have bedeviled reformers’ attempts to take the cronyism out of the state’s economic development efforts. This first tax cut is a small but important first step to ensuring every Missourian, not just a select few with special connections in Jefferson City, is empowered to make this state better.

Missouri is not a “low-tax state” yet, but today’s vote is a welcome opening salvo to get us there.

April 3, 2014

Inexcusably, Medicaid Expansion Proposal Omits More Than $1 Billion In New State Costs

The leading “Medicaid Transformation” proposal in the Missouri House purports to deliver a Medicaid expansion that effectively makes the state money. Suffice to say, that’s a highly questionable claim, and I don’t even have to cut apart any of the bill’s dubious calculations to reach a very different conclusion. Why? The issue is startlingly simple: The bill’s proponents simply did not account for more than half of the new costs of the Medicaid expansion.

Let me explain how that happened. There are two populations that we discuss regarding Obamacare’s Medicaid expansion. The more obvious of the two is the population that would become “newly eligible” under the law — those who, by virtue of the law’s passage, would now qualify for Medicaid coverage up to 133 percent of the federal poverty level. The Kaiser Family Foundation (KFF) estimated that had Missouri expanded its broken Medicaid program after the law passed, the newly eligible population would have cost the state more than a billion dollars from 2013 to 2022. The House expansion bill’s hypothetical budget only really integrates that group into its calculation starting in 2015.

It’s the second population, however, that is an even bigger budgetary concern, and it is substantively ignored in the expansion bill. That group is the “currently eligible” population: those who currently qualify for Medicaid but only become enrolled as part of the expansion’s enrollment push. The phenomenon is sometimes called the “woodwork effect,” as this population that has always been eligible emerges and begins leveraging the Medicaid entitlement for the first time. KFF estimated that over that same period, Missouri would pay $1.6 billion for those new enrollees. That’s more than a doubling of the expansion’s total costs. Without even addressing any of the other problems in the bill’s budgetary forecast, how would the state pay the currently eligible cost of the expansion? I haven’t heard an answer to that question for years now.

You can read more about the issue here. So far without expansion, Medicaid enrollment in Missouri has actually declined; under the circumstances, it is reasonable to suggest that implementation of the expansion itself would initiate the uptick in woodwork costs that KFF forecasted. It is inexcusable that these costs have not been accounted for in the House proposal, but rest assured, this isn’t the first Medicaid expansion proposal I’ve read that failed to integrate these expenses.

Spending is no substitute for reform of a thoroughly broken Medicaid program, especially when the forecasted costs are so woefully understated. If it wasn’t clear before, it should be now: reform is where the legislature should focus its attention, particularly this late in the session.

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